Zhang, ChunlinWang, Lihong2014-07-172014-07-172009-11https://hdl.handle.net/10986/18902This note explores the desirable direction for further reform of China's state-owned enterprise (SOE) dividend policy. This study represents an effort in exploring the desirable direction for further reform. It is an extension of the previous World Bank studies (World Bank, 2005, 2007) on this subject. It argues that a sound dividend policy must generate effective discipline against insiders and leave adequate managerial autonomy to them in the meantime. Considering China's current situation in light of relevant international experience, this study recommends three actions for the government to take to deepen the reform. The first is to raise the flexibility of SOE dividend ratio by adding a dividend ratio determination mechanism to the existing system of state ownership function. The second involves government monitoring and adjustment of the average dividend ratio of all central SOEs. The third is to start integrating state capital management budget (SCMB) with the general budget. The rest of the note is organized as follows. Section two discusses the nature of the issue and the criteria that a sound dividend policy must meet. Section three-five reviews payout practices of private sector firms (mainly publicly held companies but also include privately held firms), non-Chinese SOEs, and Hong Kong listed Chinese SOEs. Section six presents recommendations regarding the direction for further reform.en-USCC BY 3.0 IGOACCOUNTANTACCOUNTINGADMINISTRATIVE COSTADVANCED ECONOMIESAGENCY COSTSAGENCY PROBLEMAGENCY PROBLEMSAIRAIRLINE COMPANIESAIRLINE INDUSTRYAIRPORTAIRPORTSASSET MANAGEMENTASSETSAUTOMOBILEBAD DEBT WRITE-OFFBANK BORROWINGBONDBOND ISSUANCEBONDHOLDERSBROADCASTING SYSTEMBUDGETARY ALLOCATIONBUDGETINGCAPITAL BASECAPITAL FORMATIONCAPITAL GAINSCAPITAL INJECTIONCAPITAL INVESTMENTCAPITAL INVESTMENTSCAPITAL MARKETCAPITAL MARKETSCAPITAL REQUIREMENTSCAPITAL STRUCTURECASH FLOWCASH FLOWSCASH PAYMENTCASH PAYMENTSCASH TRANSFERCIVIL LAWCOMMON LAWCOMMON LAW COUNTRIESCOMMON STOCKCOMPANY LAWCORE BUSINESSCORPORATE DIVIDENDCORPORATE DIVIDEND POLICIESCORPORATE INSIDERSDEBTDEREGULATIONDISTRIBUTION OF INCOMESDIVERSIFIED PORTFOLIODIVESTMENTSDIVIDENDDIVIDEND PAYMENTDIVIDEND PAYOUTDIVIDEND PAYOUT RATIODIVIDEND POLICIESDIVIDEND POLICYDIVIDEND SMOOTHINGDIVIDEND YIELDDIVIDENDSECONOMIC VALUE ADDEDEQUITY CAPITALEQUITY HOLDERSEQUITY STAKESEXPENDITUREEXPENDITURESEXPROPRIATIONEXTERNAL FINANCINGFINANCIAL CRISISFINANCIAL RESOURCESFINANCIAL SITUATIONFINANCIAL STATEMENTSFINANCING ARRANGEMENTSGOVERNMENT BUDGETGOVERNMENT OWNERSHIPGRACE PERIODGROWTH RATEHOLDINGSINCOMEINFORMATION ASYMMETRYINSTITUTIONAL FRAMEWORKINSTRUMENTINSURANCEINSURANCE COMPANIESINTERNAL FINANCINGINTERNATIONAL FIRMSINVESTMENT DECISIONSINVESTMENT EFFICIENCYINVESTMENT OPPORTUNITIESINVESTMENT OPPORTUNITYINVESTMENT PROJECTSJUDGMENTJURISDICTIONLARGE SHAREHOLDERSLEGAL POWERLIQUIDATIONLOCAL GOVERNMENTSLOSS-MAKINGMARKET CAPITALIZATIONMARKET COMPETITIONMARKET ECONOMIESMARKET ECONOMYMARKET INFORMATIONMARKET MANIPULATIONMARKET SHAREMARKET VALUEMARKET VALUE OF EQUITYMATURITYMINORITY SHAREHOLDERSMONOPOLYNATIONAL BUDGETNEGOTIATIONNET PROFITNET PROFITSNPVOPEN MARKETOPPORTUNITY COSTOWNERSHIP RIGHTSOWNERSHIP STRUCTUREPARENT COMPANIESPENALTYPORTFOLIOPRIVATIZATIONPROFITABILITYPROTECTION OF MINORITY SHAREHOLDERSPUBLIC COMPANYPUBLIC SPENDINGRAILRAILWAYSREAL ESTATEREDEMPTION VALUEREGULATORSREGULATORY BODIESREINVESTMENTREPORESERVESRETAINED EARNINGSRETURNRETURNSRISKY INVESTMENTSALARYSECURITIESSECURITIES EXCHANGESETTLEMENTSHAREHOLDERSHAREHOLDER VALUESHAREHOLDERSSHAREHOLDERS MEETINGSHAREHOLDINGSHARES OUTSTANDINGSTATE OWNED ENTERPRISESTATE OWNED ENTERPRISESSTATEMENTSTOCK EXCHANGESTOCKSTARGET DIVIDENDTARGET PAYOUT RATIOTAXTAX RATETELECOMMUNICATIONSTOTAL MARKET CAPITALIZATIONTRADE POLICYTRANSACTIONTRANSACTION COSTTRANSPORTTRANSPORTATIONTREASURYTRUEVALUATIONWEAK CORPORATE GOVERNANCE10.1596/18902